President Barack Obama's 2011 budget proposal, released Monday, flattens federal IT spending and orders federal departments to consolidate and centralize IT operations.

This budget is unsparing in its criticisms and says federal IT departments have a history of not delivering productivity and performance gains "that are found when IT is deployed effectively in the private sector."

This budget outlines Obama's goal of creating an IT operation infused with private sector best practices, as well as enabling citizens to easily access government data and interact with federal agencies in new ways. The White House also wants social networking tools widely deployed to help make government, through continuous collaboration, smarter.

"The rise in social media and web 2.0 technologies has proven that no single organization has a monopoly on good ideas," said the budget narrative.

And the Obama administration wants to head in this direction without spending new money on IT.

The 2011 proposed federal budget proposal by the White House increases federal IT spending to $79.4 billion, just over 1.2% and slightly above the White House's inflation forecast for this year. In 2001, the U.S. spent $45 billion on IT. The federal fiscal year begins Oct. 1.

To cut costs, the White House will seek a reduction in the number of data centers , now at 1,100. It does not set a goal but points out that in 1998 there were only 432 data centers serving federal agencies.

It also wants to centralize the delivery of some IT services across agencies through the use of cloud technologies and other platforms. The trick for federal CIOs will be to consolidate, centralize and increase their use of technologies such as virtualization, without spending new money.

"There won't be a lot of wiggle room for new technologies," said Deniece Peterson, manager of industry analysis at government market research firm Input Inc., who said that 70% of the money spent on IT now is just "to keep the lights on," meaning, running operations.

Peterson said IT managers will likely start small but may also face more pressure from this White House for results than from previous administrations.

The Obama administration appointed the first federal CIO and one who is "aggressive in pushing the agenda," Peterson said. Last year, Obama appointed Vivek Kundra , former CTO of the District of Columbia, as the federal CIO.

Even before this budget, the White House has come up with a means to shine a spotlight on the performance of federal IT department. It created an "IT dashboard" that rates IT projects and their performance at various agencies.

The reason for this Scarlett Letter-like attention, Peterson said, is that an IT failure at a private company could put a firm out of business, but "the ramifications of failure are not as pronounced in government," hence the approach is "is kind of embarrassing agencies to perform."

If agencies can't increase spending easily, some IT vendors may be under pressure to cut their costs as well. Other vendors may see new opportunity to sell product.

Ken Powell, president of North American Operations at Micro Focus Ltd., said he is hopeful that the government's direction will expand interest in his products that enable users to migrate mainframe applications to other platforms to reduce costs. "In our economic climate and there is one thing that you have to focus on it's not saving costs, its' avoiding cost," he said.